Splunk’s (SPLK) Turnaround Hits Another Gear Under New CEO As Cloud Transition Unfolds
3:21 pm Thursday, May 26th, 2022
With new CEO Gary Steele at the helm, data storage and security company Splunk (SPLK) posted an impressive beat-and-raise 1Q23 report, indicating that its turnaround is gaining steam. Steele, who was appointed as CEO on March 2 and is the former head of Proofpoint, is tasked with reaccelerating SPLK’s growth as it completes a major transition of moving its products to the cloud. With SPLK’s top-line growing by 34% — its highest growth rate in nearly three years — it’s safe to say that Steele is off to a fast start.
To be fair, Chairman of the Board and former interim CEO Graham Smith deserves some credit, too, because he had the company moving in the right direction prior to Steele’s hiring. This is evidenced by the shift in revenue mix as cloud revenue became a larger piece of the pie. For instance, last quarter, cloud revenue surged by 69% to $289 mln, accounting for 37% of total revenue. Rewinding to 1Q21, when SPLK’s cloud transformation was just gaining traction, cloud revenue represented about 26% of total revenue.
This cloud-based momentum is gaining strength under Steele as cloud revenue jumped by 66% to $323 mln, accounting for nearly 48% of total revenue. Now that SPLK’s products are in better alignment with current trends and customer needs, the company is capitalizing on the digital transformation movement that it mainly missed out on in 2020 and early 2021. In fact, it appears that SPLK is making up for lost time by possibly taking share from Nutanix (NTNX). After the close yesterday, NTNX issued very weak guidance for Q4, standing in stark contrast to SPLK’s bullish outlook for the quarter ahead. Unsurprisingly, NTNX shares are getting pummeled today.
